Unpacking Lyft's projected financials

Last Friday, Bloombergreported a sheaf of Lyft’s financials that paint a reasonably-sharp picture of the ridesharing company’s past and expected business performance.

The short version, as you certainly expected, is that Lyft is growing quickly and loses money. The company, as you certainly expected, also expects to keep expanding its revenue while slowing its losses, eventually turning in an adjusted profit.

Inside of the numbers, however, are a host of interesting factoids for us to play with.

First, we’ll examine the numbers that Bloomberg reported in detail, draw up a chart, and then work to unpack what it all means. It’s Monday, so we deserve to have some fun.

The numbers

But before we talk about now and tomorrow, Bergen and Newcomer report that Lyft lost $606 million against $708 million in net revenue in 2016. Net revenue represents the company’s cut of fares, making it far smaller than the firm’s gross merchandise volume (or ridesharing equivalent metric).

There is, in the future, a date at which these companies expect to stop consuming cash to operate.

From there, we turn to 2017. According to the duo, Lyft will bring in around $1.5 billion in net revenue this year, a more-than-doubling of its prior-year result. The firm was tipped to reduce its pace of losses on a dollar basis in 2017, but that appears to be no longer the case. Instead of lowering its (presumably adjusted) losses to $400 million, Lyft’s investors “are now predicting losses of close to $600 million in 2017, two people” told Bloomberg.

Moving ahead, Lyft doesn’t expect to lower its losses to the zero mark next year, when it anticipates net revenue of $2.5 billion. In 2019, when Lyft is foreseen to bring $3.5 billion, the firm anticipates a $500 million adjusted profit. Moving one year further into the future, Lyft’s 2020 could see $6 billion in net revenue yielding $1 billion in adjusted profit.

So we can now see when the lines are supposed to cross for Lyft. They will not, as some had hoped, do so next year. But adjusted profits are just over a year out, at least according to some projections.

What does all that look like in chart-form? Happily, our own Holden Page had a moment to whip me up the following:

(As the 2018 loss projection number wasn’t clear, we put it at zero. The number is generous, as the firm doesn’t expect to break even that year.)

What this does is imply that Lyft has a ramp to adjusted-profit in the short-term that at least some in its camp find credible. This makes the huge sums of money flowing into the ridesharing market a bit more sensible.

There is, in the future, a date at which these companies expect to stop consuming cash to operate.

That’s why Lyft’s expected adjusted profits matter: Currently, ridesharing is simply a great way to lose money; if Lyft can start making money that soon, perhaps other players can, as well.

All the above is worth contrasting to Uber’s numbers, which the firm has been bravely leaking on a quarterly basis for some time.

Uber

Before we can compare Uber and Lyft equally, it is important we keep in mind Uber’s numbers contain a critical wrinkle in the form of UberPool revenue (the Lyft comp is LyftLine). Until recently, Uber’s net revenue total cut out UberX driver income but counted the full ticket 0f UberPool fares. That didn’t last, and now Uber counts only its share of UberPool fares, making its adjusted net revenue figure the number we actually want.

Yes, preferring an adjusted metric may feel odd, especially here in the House of GAAP, but 2017 is a year unto itself.

All that in hand, Uber’s adjusted net revenue, the good stuff, reached $1.5 billion in the first quarter of the year and $1.75 billion in the second. We’re still waiting on the firm’s Q3 number. In the second quarter of 2016, that number was $800 million.

Next, we know that Uber’s adjusted loss in the first quarter of 2017 was $708 million. That number fell to $645 million in the second quarter.

So, Uber’s adjusted profit margin was around -42 percent in the first half of this year. Lyft’s expected 2017 result is a slightly better -40 percent, provided that it doesn’t overshoot the $600 million adjusted loss target. On a GAAP basis, these figures would be worse, of course, which is something to bear in mind.

All that goes to show that the two firms are roughly as unprofitable as one another, on a percentage basis. But given Uber’s far larger revenue base — its Q2 net revenue sum is greater than Lyft’s full 2017 expected haul — its actual losses are higher in dollar terms.

So Lyft is Uber’s younger sibling in more ways than we perhaps expected.

Revenue Efficiency

Two final thoughts before we go, both related to the chart above.

First, Lyft anticipates a huge increase in revenue during 2020. The firm’s preceding year sees growth of $1 billion in net revenue, from $2.5 billion to $3.5 billion, according to projections. That’s a 40 percent gain.

Then, from 2019 to 2020, Lyft expects to grow $2.5 billion to $6 billion, expansion of over 70 percent. And notably, the firm’s expected profit margins expand over the same time frame.

The firm expects to generate $500 million in adjusted profit against $3.5 billion in net revenue in 2019. And twice that profit on just 70 percent more revenue, or so, in 2020. That means that Lyft’s adjusted profit margin will grow from 14 percent or so in 2019, according to projections, to just under 17 percent in 2020.

At the revenue-scale that Lyft anticipates, a few basis points matter.

Will $1 billion in adjusted profit against $6 billion in revenue in 2020 be enough for Lyft to actually generate $1 of GAAP profit? We’ll see, but the firm is projecting every part of the puzzle that investors might want: strong revenue growth, a path to profits, and, at the end of the chart, expanding margins.

Not bad for a company that not-too-long-ago was expected to become little more than Uber’s eventual lunch.